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European Stocks Drop as Spanish Manufacturing Declines

Dec. 2 (Bloomberg) -- European stocks fell, following three months of gains, as a report showed that Spanish manufacturing unexpectedly declined last month.

ThyssenKrupp AG slumped the most since August 2011 after it said it will increase capital by as much as 10 percent of its market value. U.K. department-store retailer Debenhams Plc fell 3.9 percent after Barclays Plc downgraded the shares. L’Oreal SA added 1.7 percent after saying it will buy back shares.

The Stoxx Europe 600 Index fell 0.3 percent to 324.10 at the close of trading in London. The equity gauge climbed 0.9 percent in November, extending this year’s rally to 16 percent, as central banks around the world committed to leave interest rates near record lows.

“The Spanish PMI is a wake up call that we still have huge divergences between a strong Germany and the periphery,” Witold Bahrke, who helps oversee $55 billion as a senior strategist at PFA Asset Management in Copenhagen, said in a phone interview. “This is a reminder that growth expectations next year are quite optimistic.”

National benchmark indexes retreated in 15 of the 18 western European markets. The U.K.’s FTSE 100 dropped 0.8 percent and France’s CAC 40 lost 0.2 percent. Germany’s DAX was little changed.

Manufacturing in the euro area expanded for a fifth month. The final reading of Markit Economics’s factory index rose to 51.6 in November from 51.3 in October. Today’s reading was above the initial estimate of 51.5. In Spain, the gauge fell to 48.6, the lowest since May, and compared with a forecast 51.1.

U.S. Manufacturing

U.S. manufacturing rose in November. The Institute for Supply Management’s factory index climbed to 57.3 in November from 56.4 a month earlier, the Tempe, Arizona-based group’s report showed. The median projection in a Bloomberg survey of 77 economists called for a drop to 55.1.

In China, a report showed the manufacturing purchasing managers’ index, released yesterday, came in at 51.4 for November, matching the 18-month high reached in October and beating 24 of 26 economist estimates. A separate report from HSBC Holdings Plc and Markit Economics today showed PMI was at 50.8 last month, compared with 50.9 in October.

ThyssenKrupp plunged 8.5 percent to 17.64 euros after saying it will increase capital and absorb money-losing businesses. Germany’s largest steelmaker agreed to sell its U.S. plant to ArcelorMittal and Nippon Steel & Sumitomo Metal Corp. for $1.55 billion, ThyssenKrupp said in a Nov. 29 statement. ThyssenKrupp had a market value of about 9.9 billion euros ($13 billion) on Nov. 29.

ArcelorMittal gained 1.3 percent to 12.85 euros.

Enel SpA retreated 3.8 percent to 3.22 euros after Deutsche Bank AG said that its estimates for earnings at Italy’s biggest utility show no growth for 2013 or 2014.

Debenhams Drops

Debenhams fell 3.9 percent to 92.95 pence. Barclays downgraded the shares to under weight, the equivalent of a sell recommendation, from equal weight, saying that the retailer’s online offering trails its competitors.

“Consensus underestimates the investment necessary both in cost and time before the company catches up with competition in our view,” the note said.

Fresnillo Plc lost 8.8 percent to 760 pence and Randgold Resources Ltd. fell 4.4 percent to 4,157 pence. Gold dropped 2.2 percent to $1,226.45 per ounce, while silver decreased 2.7 percent to $19.46 an ounce.

L’Oreal added 1.7 percent to 125.25 euros. The world’s largest cosmetics maker said it will repurchase as much as 500 million euros of shares.

To contact the reporter on this story: Jonathan Morgan in Frankfurt at jmorgan157@bloomberg.net

To contact the editor responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net

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